MHCI Group

Jason and I worked on purchasing a 195-space mobile home park for 4 years and we finally closed the deal last week. I was at that property with our District Manager yesterday and the old owner drove by. He stopped his car and flagged me down. He said, “I just got a $5,100,000 check from you all, which is the largest check I have ever received in my life, and the guy who was supposed to help me invest it won’t call me back.” I said, “That is terrible. Why don’t you take a piece of those proceeds and invest it with us?” We dove into how we structure deals. I explained to him that we pay a 10% interest rate on all of our investor’s money, and we have a 70/30 investor favored split on any sale or refinance. After we got done talking about the structure he said, “I am not sure I understand all of your Yankee language son, but the reason I would invest with is because I trust you. The main reason we sold our property to you all is because we trust you. We got higher offers on our property from larger groups. My wife and I went with you because we trusted that you would do what you said.” I did not realize the trust he had in Jason and I to do what we said. Granted, I met with him 50+ times over the last 4 years in person. Each of those meetings were never fruitful as he always gave us an excuse about why he did not want to sell. The persistence and always showing up on time built rapport with him which ultimately made him choose us. Let that be a lesson to all of the folks trying to purchase deals right now. Sometimes all it takes is persistence and doing what you said.

This is still one favorite speeches of all time! Never forget. https://lnkd.in/gZmf94T8

I am happy to announce that Jason Postill and I just closed another 195-unit property in Arkansas! This brings our total unit count in the state of Arkansas to 979 units across 18 mobile home parks. We are just shy of 1,000 units but we have 3 deals in the pipeline that should get us across that milestone before the end of the year. We have been in contact with this seller since October of 2020. I personally met with him 50+ times over the last 4 years and we had a lot of help from our broker relationships as well as other key parties to finally get this deal under contract. We are very grateful to our investors in this deal as they are the backbone of the investment. We wanted to say thank you to Jeff Moss who helped us find debt for this deal and Jessica Caldwell who is the best title agent in the business. As always, we are raising capital for multiple deals, so if you are looking for great risk adjusted returns and outsized tax benefits, please reach out to us!

We have closed 17 parks in the last 4 years and each time we come into the week of closing there is a problem we must overcome. That problem could come in the form of: ?? The bank raising our interest rate or lowering our “loan to value”. ?? The seller is not able to come up with one or multiple pieces of necessary closing items. ?? Attorneys are getting into disputes over title or multiple other contractual items. ?? The Title Company disagrees with the bank over title exceptions, or the title company is just incompetent. The list goes on. If you are closing or just closed on a mobile home park and were sweating bullets because you did not think it was going to close. It has happened to us on every single closing in the last 4 years. Every time it comes down to the wire or the closing is delayed one or multiple days. Do not get discouraged by this but remember that the week of closing is going to be very stressful and you will most likely want to clear your schedule.?

I have been told a couple of times that if I would have been born 500 years ago, I would have been “at the front a dragon boat with a battle axe and a shield.” You probably thinking to yourself “The dude with the baby face and comb over.” ?? While I may not look like it and I am not even in the same realm as how tough a UFC fighter is, I am a ferocious competitor. My ability to be unrelenting even in the face of less than favorable odds is something I pride myself on. I am telling you this because when you are buying/operating a mobile home park you need some of that “warrior spirit”. You will face tenant issues, contractors stealing from you, employees letting you down, issues with the City and the list goes on. You need to be resilient, fight back when necessary and continue to get up every day to make your property(ies) better even in the face of adversity. Without those qualities you will most likely never buy your first property and will 100% never succeed in managing the day to day.?

One of our hardest projects Jason Postill and I have ever turned around was a 43-space property located in Northwest Arkansas. It was actually a very interesting project as the group that bought the asset, brought us in after closing as their current property manager was not working out. When I say the current property manager was not working out, the property was losing $40,000 a month due to the “payroll” expenses that the property manager had brought on. We came in and assessed the project. After some extensive due diligence, decided we wanted to take it on. Then we spoke to the group that owned it and said we want equity to take over the management. They agreed and we got to work. The first thing we did was fire everyone. This caused some issues as most of the park was on the payroll. Once we fired them, they became delinquent on their rent. We had to either evict them or they moved out on their own. We had about 70% of the park vacant at its height. This was a terrible feeling, and I was living up there about 50% of the time due to this fact. Next was finding some eyes and ears on the ground and bringing our construction crew up to start rehabbing the vacant homes. We found a woman and her husband who would manage the basics (passing out notices, violations, delinquency etc) Our construction crew got to work on the 27 vacant homes that we had to rehab. The next item was converting the master metered gas at the property into individual meters. If you do not know what “master metered gas” is, its when the property is responsible for the gas/gas lines from the street in. This leaves the property with an unbelievable amount of risk if anything happens with the gas lines in the property because the property is responsible vs the gas company. We convinced the gas company to install master meters. Today the property is generating $46,000 in topline income and $27,140 in NOI. To get there here are the issues we had to go through: ·??????A tree fell on a house ·??????We spent $950,000 on improvements (rehabs, new gas system, sewer issues, tree work etc) ·??????The neighboring property tried to sue us as one of our residents was stealing copper from them. ·??????A guy pulled a knife on me. ·??????The manager we hired above ended up quitting and pouring cement down her sewer pipes. ·??????The health department tried to condemn 10 homes due to a sewer issues coming from the City's main. ·??????A house partially blew up because of a gas line issue. There are probably some other items I am forgetting but it was a tremendous project that I am very glad to have behind us.

Risk is defined by Merriam Webster as “the possibility of loss or injury.” Assessing risk when buy a mobile home park is paramount. The below items should be on your checklist to see if your risk is higher or lower: ?? Number of parks bought: The more parks that you buy the more you would be able to identify pitfalls. If you have not bought a park yet, you will be taking on more risk. ?? Type of Utilities: City utilities are the safest type of utility infrastructure. If you have any type of private utilities, you will be taking on more risk. ?? Occupancy: The more vacant a park is, the more risk you take on when purchasing the asset. ?? Geography: Smaller towns and higher crime rates equate to more risk in a purchase. ?? Types of Units: Properties with more tenant owned homes (where the tenant owns the home and you own the dirt) reduce your risk vs properties with more park owned homes (where you own the home and the dirt). ?? Price: This seems obvious but I am going to put it in here anyway. The higher the price you have to pay for the property in reference to the amount of cash flow that is being produced is going to leave you at a greater risk. Due diligence will help you vet all of the above items. Remember to scrutinize ever detail of a transaction so when you take it over there are as little unknowns as possible.

An ultra-high net worth family contacted Jason Postill and I about a 1 year ago to partner with us for the capital needed for our future mobile home park purchases. The partnership did not go anywhere because they did not see the value of the asset management, property management and construction management based on the amount of ownership we asked for. That is a completely fair assessment. If you think we are either bad at that or do not think those three pieces are worth anything, then I would never give us ownership either. However, about a month ago we received another call from them out of the blue. They stated that they had bought a mobile home park and then immediately jumped into asking us questions about how we manage contractors, how we hire property managers, what tasks maintenance guys should have etc. Of course, we gave them the information and were happy to help. At the end of the call, they asked us to come on as the property management team/construction team for a fee. Jason Postill and I responded politely “We are not in this for the fees. We are in this for a piece of ownership in the asset.” We proposed our initial offer, and they turned it down again. This is fine in our eyes as they continued to not see value in what we do. However, it was a reassuring call that even with all the resources they have, they were still having a very difficult time managing the operational side of mobile home parks. It means that our value proposition still holds a lot of weight for our investors and its not easy to replicate.?

Lets go "woke" for a second. Mobile Home Parks are one of the "wokest" asset classes in commercial real estate. Here are 4 reasons why: - New mobile homes are very energy efficient and much smaller than your traditional single family house. - The average lot rent throughout the United States is $300 a month which makes us the most affordable option for housing in America. - None of the mobile home parks our group owns has a sprinkler system at it which helps save water and reduces our carbon foot print. - Our group forgives all back rent on new acquisitions that we purchase. We think this would make even Karl Marx happy. Granted, most of our residents do not refer to their friends as "comrade" or have their pronouns on their name tag at work. We still feel that Mobile Home Parks are very woke.